Crushing debt and the uncertain effects of the COVID-19 pandemic have led Frontier Communications Corp. to file for Chapter 11 bankruptcy, and to enter into a restructuring support agreement (RSA) with bondholders.
The Norwalk company had indicated in its 2019 annual report that it was considering a restructuring and that it planned to file for Chapter 11.
Under the terms of the RSA, the bondholders ”“ who represent 75% of Frontier”™s debt ”“ are endorsing a plan designed to reduce the company”™s debt by more than $10 billion and provide financial flexibility to support continued investment in its long-term growth.
Frontier lists total debt of $21.9 billion against assets of $17.4 billion. It plans on using the Chapter 11 filing to “generate sufficient liquidity from the restructuring to meet our obligations and operating needs.”
In addition to the restructuring, Frontier received pledges of $460 million in debtor-in-possession financing. Once the court has approved the plan, the company”™s liquidity will total over $1.1 billion comprised of debtor-in-possession (DIP) financing and the company”™s more than $700 million in cash.
The firm also said it plans to sell its Washington, Oregon, Idaho, and Montana operations and assets to Northwest Fiber for $1.352 billion in cash. That deal is expected to close on or around April 30.
Frontier further said that its customers will not experience any service disruptions.
“With a recapitalized balance sheet, we will have the financial flexibility to reposition the company and accelerate its transformation by allocating capital resources and adding talent to enhance our service offerings to our customers while optimizing value for our stakeholders,” said Robert Schriesheim, chairman of the finance committee of the board of directors.
Schriesheim added that the company”™s trade vendors will be paid for goods and services provided both before and after the filing date.
“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” Frontier President and CEO Bernie Han said.
“At the same time,” Han continued, “the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keeps them connected, safe and informed, and I would like to thank our team for their continued dedication, especially in light of the current environment.”
